We do not anticipate making a material change to our $143 per share fair value estimate after wide-moat Costco posted solid fourth-quarter earnings. For fiscal 2016, the company posted $118.7 billion in sales, a 3.1% operating margin, and diluted EPS of $5.33, near our $119.6 billion, 3.1%, and $5.32 expectations, respectively. The company’s on-track performance leaves us comfortable with our long-term targets, which call for 6% average annual sales growth and 3.3% average operating margins through fiscal 2025.

While fiscal 2016 top-line results were challenged as a result of foreign exchange, lower gas prices, and deflation in certain categories (particularly food and electronics), we continue to believe the company should be able to deliver strong long-term returns as it builds its international platform and expands its membership base. At $2.65 billion, Costco’s full-year membership fee revenue was slightly ahead of our $2.60 billion expectation and the number of total cardholders at year-end exceeded our forecast by 1.4%. We continue to expect the firm has ample standing with its loyal North American customer base (renewal rates remained at 90% in the U.S. and Canada) to raise fees by approximately 10% in 2017, in line with past practice and as it did in select international markets in fiscal 2016. Fee revenue is especially important to Costco due to its low margins on merchandise sold; membership fees were 72% of Costco’s operating income for the year.

We are encouraged the company’s transition to a Citi Visa credit card from American Express is progressing smoothly, with 85% of accounts transferred to Citi activated. Despite some temporary disruptions, we expect the changeover to be a positive for Costco, with a more robust reward program (leading to incremental account growth) combining with lower costs on credit card sales.

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